Ex-Ohio attorney general picked to lead consumer finance watchdog agency

WASHINGTON — President Barack Obama has tapped Richard Cordray, a former Ohio attorney general who was a leader in state crackdowns on financial industry abuses, to head a new federal consumer watchdog agency that formally opens its doors this week, the White House said Sunday.

Obama will formally announce Cordray's nomination to lead the Consumer Financial Protection Bureau at an event on Monday.

However, the president's decision to bypass Elizabeth Warren, the bureau's architect whose candidacy has been fiercely opposed by the banking industry, may not signal an easier Senate confirmation fight.

In May, 44 of 47 Senate Republicans sent Obama a letter threatening to block the appointment of any proposed agency chief unless the bureau is reformed to ensure more "accountability and transparency." If the Republicans hold firm, Democrats would lack the 60 votes needed to break a filibuster and win Cordray's confirmation.

Don Stewart, a spokesman for Senate Republican leader Mitch McConnell of Kentucky, said Sunday that "the White House still hasn't addressed the concerns raised by Congress."

Congress created the new watchdog agency in response to the subprime mortgage scandal that crashed the U.S. housing market, sank the economy and cost millions of Americans their homes. Established under the Dodd-Frank Act that overhauled regulation of the financial industry, the bureau was granted independence and sweeping authority to dispatch examiners to Goldman Sachs, JPMorganChase and other financial industry giants on any issue affecting consumers.

Obama, in a statement, said that Cordray "has spent his career advocating for middle-class families, from his tenure as Ohio's attorney general to his most recent role as heading up the enforcement division at the CFPB and looking out for ordinary people in our financial system."

Consumer groups and their allies, who've elevated Warren to something of a folk hero for her crusade to better protect average Americans from sophisticated financial practices, seemed mollified by the decision.

AFL-CIO President Richard Trumka, said the labor umbrella group is disappointed that Obama gave in to opposition from Republicans and "the financial interests that ruined our economy." But he said that Cordray has "an outstanding record of protecting the public interest."

Stephanie Taylor, co-founder of the Progressive Change Campaign Committee, which collected 350,000 petition signatures backing Warren for the job, said that while Warren "was the best qualified ... Rich Cordray has been a strong ally of Elizabeth Warren's and we hope he will continue her legacy of holding Wall Street accountable."

Warren, widely credited with conceiving the agency and forging its creation, has been serving as an adviser to Obama and to Treasury Secretary Timothy Geithner. She recruited Cordray to serve as its enforcement chief after he lost his re-election bid as Ohio attorney general last fall to former Republican Sen. Mike DeWine.

Already, the agency has begun pushing credit card providers and mortgage lenders to simplify their forms and disclosures so that consumers can better understand all fees and can better compare different loan offers.

While Warren has sought to take a lower profile in recent months, she's been called before a House committee and faced testy questioning from Republican representatives.

In their May letter, Republicans complained that the bureau director has a five-year term and "effectively answers to no one," even setting their own budget without congressional review.

Obama, however, said that the reforms adopted after the economic crash, including creation of the new bureau, "put in place the strongest consumer protections in our nation's history."

He thanked Warren "not only for her extraordinary work standing up the new agency over the past year, but also for her many years of impassioned leadership and her fierce defense of a simple idea: Ordinary people deserve to be treated fairly and honestly in their financial dealings."

"This agency was Elizabeth's idea, and through sheer force of will, intelligence and a bottomless well of energy, she has made, and will continue to make, a profound and positive difference for our country."

Warren issued her own statement praising Cordray and saying she hopes "that those who want to cripple this consumer bureau will think again and remember that the financial crisis — and the recession and job losses that it sparked — began one lousy mortgage at a time."

"I also hope that when those senators next go home, they ask their constituents how they feel about fine print, about signing contracts with terms that are incomprehensible and about learning the true costs of a financial transaction only later when fees are piled on or interest rates are reset," Warren said.

Warren took leave from teaching law at Harvard University to come to Washington, first to head a congressional panel overseeing the use of more than $300 billion in tax dollars to bail out the banking industry.

In what may be her parting shot, she said that "partisanship may be the most important thing in Washington, but in the rest of the country, people expect their public servants to work together to learn from past regulatory failures and to put our energy into solving problems, not scoring political points."

Cordray, a former Ohio state treasurer and solicitor general, recovered more than $2 billion for the state's retirees, investors and business owners in two years as attorney general, suing major banks, credit rating agencies and subprime mortgage lenders, as well as firms preying on homeowners trying to avoid mortgage foreclosures.

He negotiated settlements that recovered $475 million from Merrill Lynch, now a part of Bank of America, $400 million from Marsh & McLennan, a huge insurance brokerage firm, and $725 million from insurance giant American International Group.